Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. NEW YORK ( TheStreet) -- Vale (NYSE: VALE) has been reiterated by TheStreet Ratings as a hold with a ratings score of C+ . The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.
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- The revenue growth came in higher than the industry average of 20.3%. Since the same quarter one year prior, revenues slightly increased by 6.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, VALE has a quick ratio of 1.65, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for VALE SA is rather high; currently it is at 52.10%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 15.05% trails the industry average.
- VALE SA's earnings per share declined by 22.5% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, VALE SA increased its bottom line by earning $3.87 versus $3.43 in the prior year. For the next year, the market is expecting a contraction of 47.3% in earnings ($2.04 versus $3.87).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, VALE has underperformed the S&P 500 Index, declining 9.37% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
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